DECISION

Fair Work Act 2009
s.185—Enterprise agreement

Deicorp Pty Ltd
(AG2018/1320)

Application for approval of the Deicorp Pty Ltd Enterprise Agreement 2018-2022 - not approved.

Introduction

[1] An application has been made for approval of an enterprise agreement known as the Deicorp Pty Ltd Enterprise Agreement 2018-2022 (the Agreement). The application was made pursuant to s.185 of the Fair Work Act 2009 (the Act). It has been made by Deicorp Pty Ltd (the Applicant). The Agreement is a single enterprise agreement.

Background

[2] The application was lodged with the Fair Work Commission (the Commission) on 5 April 2018. The application was allocated to Commissioner Gregory on 6 July 2018 and on 27 July 2018 a number of concerns were raised in relation to the Agreement with the Applicant. This included issues relating to pre-approval requirements, the National Employment Standards (NES) and the application of the Better off Overall Test (BOOT) to the Agreement. On 10 August 2018 the Applicant provided a response to the Commission which included proposed undertakings.

[3] On 17 August 2018 the application was allocated to my chambers. On 31 August 2018 correspondence was sent from the Commission raising further issues in relation to Agreement and the proposed undertakings, including a concern that clause 12.1 of the Agreement (which is titled Notice of Termination – Full Time & Part Time Employees) provided for one days’ notice of termination at clause 12.1.1, which is inconsistent with the NES. On 4 September 2018 the Applicant provided revised additional undertakings, two of which referred to daily hire employees.

[4] Clause 4 of the Agreement is titled Contract of Employment and contains the following clauses:

“4.1 Engagement of Employees

4.1.1 Employees under this Agreement shall be employed in one of the following categories:

(a) Full Time Employees;

(b) Part Time Employees;

(c) Casual Employees.

4.1.2 At the time of engagement, the Company and the Employee will agree in writing:

(a) Whether the Employee is to be engaged on a Full Time, Part Time or Casual basis….”

[5] It is apparent that daily hire employment is not contemplated in the Agreement. Correspondence was sent to the Applicant on 11 September 2018 conveying my concern that accepting an undertaking that allows for engagement of employees as daily hire is likely to result in substantial changes to the Agreement.

[6] The matter was listed for hearing before me 20 September 2018. Mr Skinner appeared on behalf of the Applicant and explained that the Applicant did not intend to change the nature of employment and it was a typographical error that daily hire employees were not included in the Agreement. It was submitted that the error occurred when he was retyping the terms of the Applicant’s previous Agreement from a PDF format to a Word format.

[7] Clause 4 of the previous Agreement is titled Contract of Employment and contains the following clauses at 4.1 and 4.2:

“4.1 Engagement of Employees

4.1.1 Employees under this Agreement shall be employed in one of the following categories:

(a) Daily hire Employees;

(b) Part-time daily hire Employees;

(c) Casual Employees….”

4.2 Daily Hire Employees

4.2.1 A daily hire employee is an employee to whom section 123(3) (b) of the FWA refers.

4.2.2 An Employee engaged in building and construction work shall be employed on a daily hire basis and shall work an average of 38 hours per week calculated over a four (4) week period.”

[8] During the hearing, Mr Skinner submitted that I should correct the Agreement to include daily hire employment as it was an error that it was not included. I indicated to Mr Skinner that I did not consider it would be appropriate to use the power to correct or amend a document under s.586(a) of the Act to include daily hire employment.

[9] Mr Skinner claimed that the Applicant did not intend to change the nature of employment nor was this discussed with employees during negotiations. He confirmed during the hearing that all employees are in fact engaged as daily hire employees, which led to a concern as to whether the Applicant had taken all reasonable steps to ensure that the terms of the Agreement, and the effect of those terms, were explained to the relevant employees, for the purposes of s.180(5)(a) of the Act, in circumstances where their category of employment was not, on its terms, covered by the Agreement.

[10] I offered the Applicant the opportunity to provide an undertaking that included reference to daily hire engagement. However, I indicated that I had concerns that the undertaking may substantially change the Agreement.

[11] On 21 September 2018 the Applicant provided consolidated written undertakings. 14 written undertakings were provided by the Applicant to resolve concerns raised in relation to the Agreement. A copy of the proposed undertakings are attached to this decision at Annexure A.

[12] Undertakings 3, 4 and 11 reference daily hire employees and are in the following terms:

“3. At Clause 4.1.1 include (a) Daily Hire. With all other categories to remain.

4. At Clause 4.2.2 add:

“A Daily Hire employee is an employee engaged as a labourer or tradesman to whom section 123 (3) of the Act applies.”

11. Clause 12.1.1 shall be amended to read:

“For Daily Hire employees, One (1) days’ notice of termination of employment will be given on either side or one (1) days’ pay will be paid or forfeited in lieu of notice. For weekly hire employees, the notice provisions of the Act and the NES shall apply.”

Consideration

Including daily hire employees as a category of employment in the Agreement by allowing a correction or accepting an undertaking

[13] As noted above, the Applicant submitted that I should correct the Agreement to include daily hire, as it was an error that daily hire employment was not included in the Agreement.

[14] Section 586(a) of the Act provides that the Commission may allow a correction or amendment of any application, or other document relating to a matter before the FWC, on any terms that it considers appropriate.

[15] In Visy Paper Pty Ltd; Visy Board Pty Ltd (Visy) 1 Commissioner Roe found that he could not allow a correction to the scope of the Agreement under section 586(a) of the Agreement, relevantly stating as follows:

“[15] The power in Section 586(a) to “allow a correction or amendment of any application or other document relating to a matter before the FWC on any terms that it considers appropriate” is a power relating to the conduct of matters before the Commission. It is distinguishable from the powers to correct obvious errors in a decision or vary or revoke a decision or deal with ambiguity or uncertainty. The Commission is not permitted to vary or revoke a decision made in respect to an enterprise agreement. An agreement is only able to be varied in specific circumstances and subject to specific procedures. I do not consider that it would be appropriate or consistent with the scheme of the Act to use the power to correct or amend a document under Section 586(a) to change the substance of an agreement. To do so would be to undermine the protections in the Act which limit the capacity to vary an agreement. The cases referred to by Visy where the Commission has utilised Section 586 have been to correct administrative or obvious errors or to rectify procedural failings. It is possible that this might extend to correcting some minor error in the name of a party or the wording of a classification or job title in a scope clause but I doubt that it could extend to a substantial change to the scope of an agreement even if the problem with the scope clause was unintended.” 2

[16] Consistent with the reasoning of Commissioner Roe in Visy, I do not consider it would be appropriate to use the power to correct or amend the Agreement under s.586(a) of the Act to include daily hire employment. I consider it would change the substance of the Agreement and to do so would be to undermine the protections in the Act which limit the capacity to vary an enterprise agreement.

[17] As noted above, I provided the Applicant with the opportunity to provide undertakings that included reference to daily hire employment, whilst noting that I apprehended that any undertaking may offend the provision in s.190(3)(b) of the Act

[18] Section 190 of the Act provides that the FWC may approve an enterprise agreement with undertakings. Section 190 (1) - (3) of the Act provide as follows:

“Application of this section

(1) This section applies if:

(a) an application for the approval of an enterprise agreement has been made under subsection 182(4) or section 185; and

(b) the FWC has a concern that the agreement does not meet the requirements set out in sections 186 and 187.

Approval of agreement with undertakings

(2) The FWC may approve the agreement under section 186 if the FWC is satisfied that an undertaking accepted by the FWC under subsection (3) of this section meets the concern.

Undertakings

(3) The FWC may only accept a written undertaking from one or more employers covered by the agreement if the FWC is satisfied that the effect of accepting the undertaking is not likely to:

(a) cause financial detriment to any employee covered by the agreement; or

(b) result in substantial changes to the agreement.”

[19] The meaning of s.190(3) of the Act was considered in Construction, Forestry, Mining and Energy Union v KAEFER Integrated Services Pty Ltd, 3 where a Full Bench of the Commission said at paragraphs [40] – [41] :

“[40] In our view, simply increasing the quantum of various benefits will not ordinarily result in “substantial changes” for the purposes of s 190(3). It seems to us that the legislative concern is to avoid imposing on employees arrangements that they have not approved; employees are not likely to object to higher monetary amounts. The position might be more complex in relation to the reintroduction through undertakings of award-based benefits that were otherwise excluded by the agreement, if this were to have a significant bearing on working arrangements. However, this does not arise in the present matter.

[41] Section 190(3) does not permit undertakings that result in the wholesale reshaping of the agreement, such that it bears no resemblance to the pre-undertaking agreement that was approved by employees. In considering the application of s 190(3), each case will turn on its own circumstances…” 4 (references omitted)

[20] In my view, I cannot accept undertakings 3, 4 and 11 as I consider that it substantially changes the Agreement to provide for a new category of employment not contemplated in the Agreement that was voted on by the employees.

[21] I have considered the Applicant’s submissions that the current clause 12.1 of the Agreement did not change from the previous Agreement which could satisfy me that the intent of the Agreement was to cover daily hire employees. Clause 12.1.1 provides “One (1) days’ notice of termination of employment will be given on either side or one (1) days’ pay will be paid or forfeited in lieu of notice”. The Applicant submitted that it was simply a typographical error that daily hire employment was not referred to in the Agreement and because of notice provisions in clause 12.1.1 of the Agreement, substituting the word “full time” for “daily hire” better reflects the terms that are in the Agreement and the existing and ongoing employment relationship. However, I am not satisfied that the notice of termination provision, which I note is titled, “Notice of Termination – Full Time & Part Time Employees” is sufficient as providing for a category of daily hire employment.

[22] I note that the undertaking could also be considered detrimental to employees, as daily hire employees would have been covered by an Agreement where they could now be employed as a full time.

Section 180(5) issue – explanation of the terms and effect of the Agreement

[23] The submissions of the Applicant during the hearing that all employees are engaged as daily hire employees led to a concern as to whether the Applicant had taken all reasonable steps to ensure that the terms of the Agreement, and the effect of those terms, were explained to the relevant employees, for the purposes of s.180(5)(a) of the Act, in circumstances where their category of employment was not, on its terms, covered by the proposed agreement.

[24] Section 186(2)(a) provides as follows:

“(2) The FWC must be satisfied that:

(a) if the agreement is not a greenfields agreement—the agreement has been genuinely agreed to by the employees covered by the agreement.”

[25] Section 188(a)(i) provides as follows:

“…An enterprise agreement has been genuinely agreed to by the employees covered by the agreement if the FWC is satisfied that:

(a) the employer, or each of the employers, covered by the agreement complied with the following provisions in relation to the agreement:

(i) subsections 180(2), (3) and (5) (which deal with pre approval steps).”

[26] Section 180(5) provides as follows:

“(5) The employer must take all reasonable steps to ensure that:

(a) the terms of the agreement, and the effect of those terms, are explained to the relevant employees; and

(b) the explanation is provided in an appropriate manner taking into account the particular circumstances and needs of the relevant employees.”

[27] Satisfaction under s.186(2)(a) is a jurisdictional prerequisite for the approval of any enterprise agreement. If s.180(5) is not satisfied, then the Commission cannot be satisfied that the Agreement has been genuinely agreed to pursuant to s.188(a)(i) and consequently the Commission cannot attain satisfaction of the requirement at s.186(2)(a) of the Act.

[28] The meaning of s.180(5) and what is required, particularly in regards to s.180(5)(a) was subject to detailed consideration in the recent decision of his Honour Justice Flick Construction, Forestry, Mining and Energy Union v One Key Workforce Pty Ltd (One Key Workforce (No 1)).⁵

[29] His Honour Justice Flick said in One Key Workforce (No 1):

“91…A failure to comply with a “[p]re-approval requirement”, in this case the failure to “take all reasonable steps” for the purposes of s 180(5), precluded the proposed Agreement from being an agreement susceptible of subsequent approval by the Commission. And a failure to take the necessary steps to secure the agreement of those “employees covered by the agreement” (s 186(2)(a)) – be it genuine agreement or otherwise – again precluded the proposed Agreement from being an agreement in respect to which the Commission need reach any state of satisfaction.”

…

97…Section 180(5) is not a section which is expressed in terms of whether the Commission is “satisfied” that “all reasonable steps” have been taken. That subsection is expressed as a statement of objective fact as to that which must occur before approval is sought. If “all reasonable steps” have not in fact been taken, the Commission lacks power to “approve” the agreement.”

…

103 The requirement imposed by s 180(5) to “take all reasonable steps to ensure that … the terms of the agreement, and the effect of those terms, are explained” is an important obligation imposed upon an employer to ensure that employees are as fully informed as practicable. The requirement is not a mere formality. Whatever steps may be necessary will depend upon the facts and circumstances of each particular case; but those steps are not satisfied by a person reading – without explanation – the terms of an agreement to an employee.” 6

[85] That the content of the explanation given is an important consideration in assessing whether all reasonable steps were taken for the purposes of s.180(5) is made clear by the Full Court of the Federal Court in One Key Workforce Pty Ltd v Construction, Forestry, Mining and Energy Union (One Key Workforce (No 2)). 7 In this regard, the Full Court made the following observations about the Commission’s function in considering under s.188(a)(i) whether it is satisfied that the employer has complied with s.180(5):

“…In order to reach the requisite state of satisfaction that s 180(5) had been complied with, the Commission was required to consider the content of the explanation and the terms in which it was conveyed, having regard to all the circumstances and needs of the employees and the nature of the changes made by the Agreement….” 8 

[30] I agree with and adopt the reasoning of the Full Court in One Key Workforce (No 2).

[31] In this case, the group of employees who voted for the Agreement are daily hire employees, however, those employees voted on an Agreement which is not expressed to cover daily hire employees. This raises the question as to whether they voted on an Agreement that does not cover them, or as the Applicant put it, they understood it was the same Agreement as the existing Agreement. The Applicant states that a document outlining the summary of the changes to the Agreement was provided to each employee during the negotiation period, which indicated the changes to the Agreement. The summary document includes relevant wage rates and increases and changes to the classification structure. The document makes no reference to daily hire employment and includes the words “all other terms and conditions of employment remain unchanged”. The fact of the matter is that the terms and conditions of employment did change in the Agreement as it no longer contemplates daily hire employment. This suggests that the Applicant has not taken all reasonable steps to ensure that the terms of the agreement, and the effect of those terms, were explained to the relevant employees pursuant to s.180(5) of the Act.

[32] I have considered the Applicant’s submissions that the previous Agreement provides for daily hire employment and that it did not intend to change the nature of employment nor was this discussed with employees during negotiations. However, I do not have any evidence before me that employees covered by the Agreement considered they would be daily hire employees. What I have before me is an Agreement that on its terms does not contemplate daily hire employment and a previous agreement that clearly contemplates daily hire employment.

[33] Overall, for the reasons set out above I am not satisfied that the steps taken by the Applicant in this case constitute reasonable steps. It follows that I cannot be satisfied that the Applicant complied with s.180(5) of the Act. As s.180(5) is not satisfied, I cannot be satisfied that the Agreement has been genuinely agreed to pursuant to s.188(a)(i) and consequently I cannot attain satisfaction of the requirement at s.186(2)(a).

[34] Pursuant to s.190 of the Act, the Commission can accept an undertaking if it has a concern that the enterprise agreement does not meet the requirements set out in s.186 and s.187 of the Act. Section 186(2)(a) of the Act provides that the Commission must be satisfied that if the agreement is not a greenfields agreement—the agreement has been genuinely agreed to by the employees covered by the agreement. Therefore, the Act allows for the Commission to accept an undertaking if it has a concern in relation to whether the agreement has been genuinely agreed to by the employees. However, for the reasons set out above I cannot accept an undertaking in relation to genuine agreement, by including daily hire employment, as I consider that it would result in substantial changes to the Agreement pursuant to s.190(3) of the Act.

Conclusion

[35] I cannot accept undertakings 3, 4 and 11 as I consider that it substantially changes the Agreement to provide for a new category of employees not contemplated in the Agreement that was voted on by the employees.

[36] For the reasons set out above, I am not satisfied that the employer complied with the pre-approval step set out in s.180(5). I am therefore not satisfied that the employer complied with s.188(a)(i) and therefore I am not satisfied the employees have genuinely agreed to the Agreement. As the Agreement was not genuinely agreed to by the employees covered by the Agreement, I am not satisfied that the requirement in s.186(2)(a) has been met.

[37] For the reasons given I cannot approve the Agreement. The application to approve the Agreement is dismissed.

COMMISSIONER

Appearances:

M Skinner on behalf of the Applicant

Hearing details:

2018

Melbourne (Telephone Hearing):

20 September.

Printed by authority of the Commonwealth Government Printer

<PR701087>

ANNEXURE A

 1  Visy Paper Pty Ltd; Visy Board Pty Ltd [2017] FWCA 1395

 2   [2017] FWCA 1395 at [15]

 3   Construction, Forestry, Mining and Energy Union v KAEFER Integrated Services Pty Ltd [2017] FWCFB 5630

 4   [2017] FWCFB 5630 at [40] – [41]

5 Construction, Forestry, Mining and Energy Union v One Key Workforce Pty Ltd [2017] FCA 1266

 6   [2017] FCA 1266 at [91], [97] and [103]

 7   One Key Workforce Pty Ltd v Construction, Forestry, Mining and Energy Union [2018] FCAFC 77

 8   [2018] FCAFC 77 at [112]